Taxpayers shoulder huge risks of east-west link

Victorian taxpayers are facing hundreds of millions of dollars of risks from the east-west road project, including a promise to foot the bill if the project is hampered by industrial action linked to government policy.

Taxpayers shoulder huge risks of east-west link

Victorian taxpayers are facing hundreds of millions of dollars of risks from the east-west road project, including a promise to foot the bill if the project is hampered by industrial action linked to government policy.

In an extraordinarily generous arrangements for the private sector, the government is also offering to pick up the tab if toll revenue turns out to be lower than anticipated, if interest costs on debt are higher than predicted, or if construction is delayed by events that ''prevent construction milestones being met''.

Expression-of-interest documents for the project, costing between $6 billion and $8 billion, reveal the government - and ultimately taxpayers - will bear at least some risk for every possible contingency outlined under the public-private partnership arrangements.

An industry insider with a long history of involvement in public-private partnership said the risk-sharing arrangements with the private sector were heavily stacked against taxpayers in favour of the private sector in a high-stakes attempt to attract bidders.

The government is also offering to share the costs with the private construction company if CityLink - which operates the Tullamarine Freeway - delays or refuses access to allow the construction of on and off ramps.

Foreshadowing a possible industrial showdown, the government has also warned it will be demanding the construction company and subcontractors comply with its strict construction code, designed to break union power on building sites.

The code, which among other things requires construction companies to allow non-unionised workers on government projects, is being fiercely resisted by the Construction, Forestry, Mining and Energy Union.

The tender documents stipulate that any costs arising from industrial action triggered by government attempts to enforce the code or other government policies will be borne by taxpayers.

While the cost of building the road using a public-private partnership arrangement will be compared against the cost of delivering it solely as a government project, the documents say the comparison will not be made public.

The government also appears to have ruled out the possibility of the state building the road, even if it is cheaper to do so. ''There is no longer an assumption that the state will revert to traditional design and construct delivery if … cost expectations are not met,'' the document says.

Shadow treasurer Tim Pallas predicted the project could ''strangle the life out of Victorian budgets for decades to come''.

Under the funding model, the government will collect the toll revenue and pay a private operator a fixed payment to operate the road, meaning it will bear the cost if traffic flows are lower than anticipated, as was the case on similar road projects in Sydney and Brisbane.

The government says this model is most likely to attract ''robust competition'' for the construction, operation and financing of the project.

A government spokesperson said: ''Labor needs to stop opposing the east-west link and support this nation-building project that will generate 3200 jobs during construction and transform Victoria's transport network.''

The government has refused to release information on the cost, likely tolls and traffic flows, saying it would jeopardise the tendering process.